PHOTO: CLAIRE EASTHAM-FARRELLY/RNZMortgage costs will rise by around 0.2 percentage points, according to the RBNZ.
ANALYSIS: The RBNZ’s finalised capital review will make banks safer, borrowing more expensive, deposit rates lower and lending more conservative.
The RBNZ wants to make banks safer against shocks. Banks will hold more capital, so when there is a shock, the banks’ shareholders will lose their money rather than needing a public bailout, as happened in many countries during the global financial crisis.
However, there are no free lunches. A safer banking system reduces the risk of an unknown and extreme event in the future, for some real costs now. The real costs are likely to come from three sources: more expensive mortgages, lower deposit rates and fussier lending by banks.
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